Published in the Coffs Coast Advocate on 4 April 2015.
John’s assets consist primarily of a very large self-managed superannuation fund (SMSF). John and his wife, Jane are both members and trustees of the SMSF. John and Jane each have two children to previous relationships.
John makes a will, leaving the whole of his estate to Jane and his two children equally. He appoints all three beneficiaries as his executors.
John also makes a binding death benefit nomination in relation to the SMSF, directing that the whole of his member balance is paid to “Trustee of Deceased Estate”, with the intention that the balance of his super fund is paid to his estate and thereafter distributed to the three beneficiaries equally, in accordance with the provisions of his will.
When John dies, Jane as the surviving trustee of the SMSF, appoints her daughter, as an additional trustee of the SMSF, pursuant to the terms of the SMSF trust deed.
Jane seeks legal advice, questioning whether the binding death benefit nomination is valid. The advice that she receives is that the nomination is not valid and accordingly, Jane and her daughter, as trustees of the SMSF, exercise their discretion to pay the whole of John’s superannuation to Jane.
This means that John’s children are essentially disinherited.
John’s children make an application to the Supreme Court seeking a declaration that the binding death benefit nomination is valid.
The court decides that although “Trustee of Deceased Estate” is an expression that is used in income tax law, it is not permissible in terms of the provisions of the SMSF trust deed and if John wanted the balance of his super to be paid to his estate, he should have nominated his “Legal Personal Representative” as the recipient of the funds.
The court upholds the payment of the whole of John’s super to Jane and on a technicality, John’s wishes to provide for his children are not honoured.
John’s children have no alternative but to commence further court action under “Family Provision” legislation, but although they both had a loving relationship with their father, they are unable to demonstrate to the court that they have any great financial needs and the court only awards them a nominal sum.
